No, you can not elect to include the FSA funds in your income and tax the dependent care deduction. The purpose of the change was not for this purpose. In order to get any child-dependent care credit, the amount of the FSA is going to first be applied to the dependent care expense. If your dependent care exceeded the FSA then the remainder of your dependent care expense will be considered for the dependent care credit.
The intention of the Dependent Care FSA is to collect tax-advantaged dollars to pay for child and dependent care. The purpose of the change in the Taxpayer Certainty and Disaster Relief Act of 2020 was to help taxpayers who suddenly did not have access to child care because of COVID to carry over unpayable amounts in your FSA from 2020 to 2021. This was updated to also allow similar carryover from 2021 to 2022.
This carryover is to help those parents who have FSA withholdings reported in Box 10 their W-2 but do not have the daycare expenses to apply the funds. So that they do not have to report the excess of unused funds on daycare, it allows you to carry over the unused portion. Notice 2021-15 and Notice 2021-26 both address issues related to changes in the dependent care FSA programs (also the changes apply to health care FSAs, but this does not apply to your question).
In both notices, the consistent reference to amounts to be carried over is to "unused amounts", that is, amounts that you or your employer contributed to your dependent care FSA but which you did not spend on dependent care in 2021.
Also, there is nothing that states if you do not take the funds out of your FSA that you can carry the full amount over. In fact, you will find that TurboTax will not allow you to carry the full amount over if you enter daycare expenses. If you have an amount of FSA funds in Box 10 of the W-2, that amount will be taken into consideration in the calculation of the dependent care credit. It does not ask you if you took this money out of your account. The fact that this is not addressed leads me to believe that it does not matter whether or not you took the funds out of the account.
The change was only to prevent taxpayers from losing their FSA funds and then having to report them as income.
